By Pamela Yip
THE AMT: The alternative minimum tax was designed to ensure that high-income earners with multiple deductions pay at least some tax. But over time, it has captured many moderate-income taxpayers because it wasn’t indexed to inflation.
Last year, the AMT was patched — permanently — to prevent more middle-income taxpayers from being drawn in.
“After years of temporary patches to help middle-income earners avoid the AMT, the AMT exclusion amount was increased in 2013 and permanently indexed for inflation,” Luscombe said.
The AMT is imposed on an adjusted amount of taxable income above a certain threshold or exemption level.
For the 2013 tax year, the exemption amounts are: $51,900 for individual taxpayers; $40,400 for married couples filing separately; and $80,800 for married filing jointly.
“A taxpayer’s alternative minimum taxable income has to exceed the exemption amount before you are subject to the AMT,” Luscombe said.
MEDICAL EXPENSES: Taxpayers will still be able to deduct their medical expenses, but it will be more difficult for many to qualify.
The threshold for deducting medical expenses now stands at 10 percent of adjusted gross income, up from 7.5 percent. There’s an exception, though, for those older than 65. For them, the old rate is grandfathered in until 2017.
HOME OFFICE DEDUCTION: Beginning in 2013, taxpayers who work at home will have a simplified option for figuring their deduction.
“You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively,” the IRS said.
“This simplified option does not change the criteria for who may claim a home office deduction. It merely simplifies the calculation and record keeping requirements of the allowable deduction.”
Until now, those who qualified for a deduction had to figure actual expenses for a home office. But now, you can take a standard deduction of $5 per square foot, up to 300 square feet. The maximum deduction using this method is $1,500.
The IRS said those who use the simplified option will have to fill out one line on Schedule C, as opposed to a 43-line form.